U.S. Federal Tax Law Hierarchy
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U.S. Federal Tax Law Hierarchy

2 years ago · 2 min read

Tax practitioners provide tax advice to clients and should be familiar with the applicable standards for providing such advice, including Circular 230, the AICPA’s Code of Professional Conduct and the AICPA’s Statements on Standards for Tax Services (SSTSs). CPAs need to keep appropriate documentation of all tax research in accordance with these standards.

CPAs should carefully evaluate research tools available to them. In this digital age, many resources are available online. Tax research tools will be different for each CPA firm and will depend on the practice areas, size of the client base and budget. The relative authority of sources must be kept in mind. Some sources are not authoritative and provide only guidance; these sources should not be cited as legal authority.

It's also important to distinguish between primary and secondary sources. Primary sources are documents issued by the government. Secondary sources are prepared by vendors who provide tax research services, legal analysts, scholars and tax professionals.

The information below summarizes the weight of authority from highest to lowest for use in determining whether these sources can be relied upon for a tax position.

U.S. Constitution

(This is the highest authority – Congressional power to enact tax laws.)

U.S. Internal Revenue Code (IRC) (statutes)

(This is the foundation for all federal tax authority.)

Income Tax Treaties

U.S. Treasury Regulations

(These interpret and give direction on complying with the statutory laws; they are published in the Federal Register.)

  • Overview of general types:

    • Final (highest authority issued by the Treasury and binding on the IRS; subject to a change in the IRC)

    • Temporary (provides guidance until final regulations are issued and have the same authority as final regulations)

    • Proposed (generally are not binding unless the IRS states otherwise)

  • Tax regulation types:

    • Legislative (same authority as IRC statute)

    • Interpretative (not specifically authorized by the law and are subject to challenge if they do not reflect congressional intent)

    • Procedural (generally considered binding on the IRS, e.g., Statement of Procedural Rules [26 CFR 601.105] are only considered directive)

Legislative history

Judicial authority

(The authority is based on the rank of court and jurisdiction covered by the court as well as the date of the ruling.)

  • U.S. Supreme Court (Highest court; decisions are binding on all lower federal courts.)

  • U.S. Circuit Court of Appeals (Decisions are only binding on district courts within the circuit but can be persuasive in other federal courts of appeal.)

  • U.S. District Court (Decisions are not binding on any courts outside the district but can be persuasive.)

  • U.S. Tax Court (Generally, decisions are given more weight than a U.S. District Court decision on the same tax issue. There are three types of decisions: regular, memorandum and summary. Summary decisions have no precedential weight.)

  • U.S. Court of Federal Claims (Decisions are binding in the U.S. Court of Federal Claims or in the Court of Appeal for the Federal Circuit.)

IRS releases/Office of Chief Counsel

  • Revenue Rulings (official IRS interpretation of IRC, related statutes, tax treaties and regulations and can be relied upon and cited as authority)

  • Revenue Procedures (official IRS interpretation on how to comply with the tax law and can be relied upon and cited as authority)

  • Private Letter Rulings, Determination Letters, Technical Advice Memoranda and Chief Counsel Advice (These provide guidance on a specific taxpayer’s situation and cannot be relied upon by other taxpayers, however, they can provide insight on the IRS’s position on certain issues and may lead to a primary source that may not have been previously considered.)

  • Notices (These provide guidance that involve substantive interpretations of the IRC or other provisions of the law.)

  • Announcements (These are information with immediate or short-term value such as information about upcoming regulations or an approaching deadline.)

  • IRS Forms, Publications and FAQs (These provide guidance only and should not be solely relied upon.)

Secondary sources

(These are unofficial sources that carry lower weight of authority than primary sources; they should not be cited as authority.)

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